Financial Accounting

4ACCN008C-n
Semester 1, 2023/2024
Lecture 1: Introduction to Accounting
Liliya Memesheva • lmemesheva@wiut.uz
 Learning Outcomes:
Upon successful completion of the session, students will be able to…
1.To define financial accounting – recording, analyzing and summarizing financial data;
2.To identify the users of financial statements and state and differentiate between their
information needs;
3.To identify the purpose of each of the main financial statements;
4.To explain what is meant by governance specifically in the context of the preparation of
financial statements;
5.To describe the duties and responsibilities of directors and other parties covering the
preparation of the financial statements;
6.To analyze the role of International Financial Reporting Standards;
7.To distinguish the role of the regulatory system including the roles of the IFRS Foundation
(IFRSF), the International Accounting Standards Board (IASB), the IFRS Advisory Council
(IFRS AC) and the IFRS Interpretations Committee (IFRIC).

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General information
Khurram Khan (Co-module Leader) k.a.khan@wiut.uz
Omonjon Ganiev (Co-module Leader) oganiev@wiut.uz
Liliya Memesheva Team member lmemesheva@wiut.uz
Akhrorjon Yakubjonov Team member a.yakubjonov@wiut.uz
Hamid Waqas Team member hwaqas@wiut.uz
Otabek Fazylov Team member ofazilov@wiut.uz
Murtaza Niazi Team member mniazi@wiut.uz
Kamolakhon Alikulova Team member k.alikulova@wiut.uz

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 Teaching schedule
Teaching Topic
Week
1 Introduction to Accounting
2 Accounting Cycle: categories of accounts; double-entry rules
3 Accounting Cycle: journals, ledgers, trial balance
4 End of year adjustments: Inventory
5 End of year adjustments: Depreciation
6 End of year adjustments: Accruals and Prepayments, Provision for Bad and Doubtful Debt
7 In-class test
8 Preparation of Profit and Loss Account
9 Balance Sheet Part
10 Preparation of Cash-Flow Statement
11 Consolidated Financial Statements

12 Interpretation of Financial Statements: Ratio Analysis

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WHAT IS ACCA?
Chartered Certified Accountants, a thriving global ACCA is the
Association of community of 233,000 members and 536,000 future
members based in 178 countries that upholds the highest
professional and ethical values. ACCA qualifications develop
forward-thinking professionals with the financial and business skills
essential for the creation of sustainable economies and flourishing
societies

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ACCA ACCA Accredited Programme
Association of Chartered Certified Accountants (ACCA) has accredited
the following programmes of Westminster International University in
Tashkent:

BSc Finance https://www.wiut.uz/finance

BSc Economics with Finance https://www.wiut.uz/economics-with-finance
BA Business Management https://www.wiut.uz/business-management

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The students should choose the following modules
to get exemptions from ACCA examinations:
WIUT Module ACCA Qualification Offered in
No Paper F1 Business and Technology On completion
of University
Management Accounting (MA) Paper F2 Management Accounting Level 5
Financial Accounting (FA) PaperF3 Financial Accounting Level 4
Commercial and Corporate Law (CCL) PaperF4 Corporate and Business Law Level 5
Strategic Management Accounting and Performance PaperF5 Performance Management Level 6
Measurement (SMAPM)
Principles and Practices of Taxation (PPT) PaperF6 Taxation Level 6
Financial Reporting (FR) PaperF7 Financial Reporting Level 6

Audit and Assurance (AA) PaperF8 Audit and Assurance Level 6

Financial Management (FM) PaperF9 Financial Management Level 5

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What is business?
An organization or economic system where
goods and services are exchanged for one
another or for money.

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Sole trader
A sole tradership is a business owned and run by one
individual, perhaps employing one or two assistants and
controlling their work.

(+) Owner has complete control over the business

(-) Owner is personally liable for all debts (unlimited liability)

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Partnership
Partnership These are arrangements between individuals to carry on
business in common with a view to profit. A partnership, however,
involves obligations to others, and so a partnership is usually
governed by a partnership agreement.

(+) Additional capital can be raised because more people are

investing in the business

(-) Partners are jointly personally liable for all debts (unlimited liability)
unless they have formed an LLP

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Limited liability company
Limited liability status means that the business's debts and the
personal debts of the business's owners (shareholders) are legally
separate. The shareholders cannot be sued for the debts of the
business unless they have given some personal guarantee

(+) Limited liability makes investment less risky than being a sole
trader or investing in a partnership

(-) Limited liability companies have to publish annual financial

statements. This means that anyone (including competitors) can
see how well (or badly)they are doing.

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Accounting Concept*
Accounting Concept*

Separate Business Entity

The corporation is separate and distinct from its owners.
An owner cannot remove funds from a business without
recording it as either a loan, compensation, or an equity
distribution.

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 Separate
Separate business
business entity:entity
a task task

Person named Mr. Brown who owns a house that has a market value of
$300,000. He has a business of textiles named Texticom where he has
invested $150,000 as on Jan 1st, 2019.
During the year 2019, Mr. Brown withdraws $7,000 from the business for
his personal use. The assets of the business include plant & machinery
worth $4,000, computer worth $5,000. Mr. Brown has also done shopping
worth $500.
Comment and analyze the above scenario.

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Accounting concept*
Going concern or Continuity. The valuation
of the assets and liabilities of a corporation is
based on the assumption that the company is
going to continue in business for a reasonable
period of time in the future.

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Accounting concept*

Money Measurement – the monetary unit is used as

the standard to record all transactions of the company.
Otherwise, it would be difficult to compare the relative
performance of the same company over time or the
performance of two companies for the same time period

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Money measurement: a task
Which of the following transactions should be recorded in the Financial Accounting
System?

1) The employment of 10 personnel.

2) The purchase of plant & machinery worth $200.
3) The purchase of Goods worth $100.
4) The retirement of 2 employees.

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Answers
1) In this case, employment of 10 personnel will not be recorded as they cannot be
measured in the terms of money but the salary will be shown as an expense of the
business.
2) The purchase of plant & machinery worth $200 is measured in terms of money,
so it shall be recorded as a fixed asset.
3) The purchase of Goods worth $100 is measured in terms of money so it shall be
recorded as a purchase expense and then are added to the inventory of the
business. But the qualities of goods are not recorded because they lack money
value.
4) The retirement of 2 employees cannot be measured in terms of money so this
event is not required to be recorded.

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What is the main goal of any business ?
Businesses of whatever size or nature exist to make a
profit.

Profit is the excess of income over expenditure.

When expenditure exceeds revenue, the business is
running at a loss.

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 Accounting?
Accounting?

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 Accounting
The systematic recording, reporting, and analysis of financial transactions of a
business
Communicates financial information to those who make decisions and control
the implementation of those decisions

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 The Scope of FA
Collect information regarding financial
transactions
Stage 1
Express in monetary terms

Record in accounting journals

Summarize and present such financial

information in financial statements

Stage 2 Balance Profit and Loss Cash flow

Sheet Account statement

Analyze and interpret financial statements

Stage 3
Users of FA

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Accounting career path
Branches of Accountingg
Financial Accounting

Managerial Accounting

Auditing

Tax Accounting

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Financial Accounting

The classification and recording of the

monetary transactions of an entity in
accordance with established concepts,
principles, accounting standards and
legal requirements;
and their presentation, by means of the
profit and loss accounts, balance
sheets, cash-flow statements, during
and at the end of an accounting period.”

“The classification and recording of the monetary transactions of an entity in accordance with established concepts, principles,
accounting standards and legal requirements;
and their presentation, by means of the profit and loss accounts, balance sheets, cash-flow statements, during and at the end of an
accounting period.”
Accounting concept*
Time period /
Periodicity – financial
statements should be
prepared at the end of a
defined period of time,
and this period should be
adopted as the regular
accounting (reporting)
period. Usually entities
use twelve-month period
to prepare their financial
statements.
FA highlights
FA highlights
The way in which company funds have been invested (the balance
sheet);
The return made on those investments (the income statement);

The uses and sources of cash (cash flow statement)

Management Accounting
• Provides information that supports strategic and
operating management decisions

• A Control tool that provides information to

management about performance of the organization

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Financial vs. Managerial
Accounting

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Auditing
 An examination of assessment of the activities,
controls, records and systems that underpin accounting
information
External audit
The independent examination of, and expression of
opinion on, the financial statements of an enterprise.
Internal audit
An appraisal activity established within an entity as a
service to the entity. Its functions include, amongst other
things, examining, evaluating and monitoring the
adequacy and effectiveness of the accounting’s internal
control systems.

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 True or False?
1. Accounting is much more theoretical than practical
2. Accounting is information science which is concerned with collecting,
organizing and analyzing information
3. Financial accounting information is prepared only for internal users.
4. Managerial accounting information is more detailed than Financial
accounting.
5. Financial accounting is about budgeting

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 Duties and responsibilities of those charged with
governance

Those charged with governance of a company are

responsible for the preparation of the financial
statements.
Corporate governance is the system by which
companies and other entities are directed and
controlled.

The board of directors of a company are usually the top management and are those who are charged
with governance of that company.
Responsibility for the financial statements
Directors are responsible for the preparation of the financial statements of the
company. Specifically, directors are responsible for:

The preparation of the financial statements of the company in accordance with the
applicable financial reporting framework (eg IFRSs)

The internal controls necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to error or fraud

The prevention and detection of fraud

It is the directors' responsibility to ensure that the entity complies with the relevant
laws and regulations.

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Accounting standards

•IFRSs are produced by the International

Accounting Standards Board (IASB).

•The IASB operates under the oversight of the

IFRS Foundation.

https://www.ifrs.org/

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IFRS Advisory Council
The International Accounting Standard Board (IASB) develops IFRSs. The IASB is an
independent, privately funded body that develops and approves IFRSs.

The IFRS Advisory Council is essentially a forum used by the IASB to consult with the outside
world. It consults with national standard setters, academics, user groups and a host of other
interested parties to advise the IASB on a range of issues, from the IASB's work programme for
developing new IFRSs to giving practical advice on the implementation of particular standards.

The IFRS Interpretations Committee provides guidance on specific practical issues in the
interpretation of IFRSs.
The IFRS Interpretations Committee has two main responsibilities.
To review, on a timely basis, newly identified financial reporting issues not specifically
addressed in IFRSs.
To clarify issues where unsatisfactory or conflicting interpretations have developed, or seem
likely to develop in the absence of authoritative guidance, with a view to reaching a consensus on
the appropriate treatment

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 Lecture Roundup:
1. Financial accounting is a way of recording, analyzing and summarizing financial data.
2. Businesses of whatever size or nature exist to make a profit.
3. There are various groups of people who need information about the activities of a
business.
4. Those charged with governance of a company are responsible for the preparation of
the financial statements.
5. The principal financial statements of a business are the statement of financial position
and the statement of profit or loss.
6. Many figures in financial statements are derived from the application of judgment in
applying fundamental accounting assumptions and conventions. This can lead to
subjectivity. Accounting standards were developed to try to address this subjectivity.
7. The IASB develops IFRSs. The main objectives of the IASB are to raise the standard of
financial reporting and eventually bring about global harmonization of accounting
standards.

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 Reading material

1. Dyson, J.R (2010) Accounting for Non-Accounting Students. Chapter 1

2. Woods, F. & Sangster, A.(2005) Business Accounting 1, 10th ed. Chapter 1

3. ACCA (2020) Approved Interactive Text. Foundations in Accountancy FFA

2019/2020. BPP Media Ltd.

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